Chartists and Fundamentalists in an Agent Based Herding Model

Under an artificial asset market, we propose a model in which agents choose either a chartist or a fundamentalist forecasting rule and interact with each other. Agent´s anticipations of prices depend on the past performance of investment strategies. The interactions between these two trader types may generate cyclical dynamics. An alternative dominance of both trader types is observed in the market according to the relative success of the strategies. The magnitude of this dynamics is affected by the noise included in these rules. The population of the competing forecasting strategies also depends on the confidence of fundamentalists in the return to fundamentals and on the amount of trust in past price movement for chartists. Moreover such dynamics generate wide price fluctuations.